At The Top - February 2009

Economic Turmoil Proves Acute Need for Financial Education Programs

by Alan Diskin

With the recent volatility on Wall Street, those of us trying to survive on Main Street had better become more financially literate. If the hallowed halls of banking and lending institutions can crumble, so can our respective personal financial frameworks. For the last two years, consumer spending has outpaced after-tax earnings. Additionally, we carry approximately $2.5 trillion in debt, excluding home mortgages. We can, and must, teach the next generation to do better.

When did you first learn what compound interest was? Did you understand mortgage rates and the different types of loans that were available before you bought your first house? Or are these concepts still a little cloudy for you to articulate even now? Are you a responsible steward of the economy, and will you teach your children to do the same?

Unfortunately, research indicates that only 43 percent of parents have discussed the importance of prioritizing needs and wants with their kids; and a surprising 42 percent of parents have not taken any steps whatsoever to discuss financial basics with their children, according to Capital One’s ‘2006 Back to School Survey.’

Many parents assume—incorrectly—that their children learn money management skills as part of their school’s curriculum, when in fact, fewer than half of U.S. states require even a basic economics course, much less personal financial literacy education.

Currently in Nevada, schools are not required to teach a financial literacy course, and there is no funding for it. Instead, Nevada’s academic content standards require that students learn fundamentals of personal finance across the curriculum, where they are integrated into mathematics, social studies and career and technical education content standards. With such little emphasis from the schools, it is critical to utilize programs provided by outside organizations that can provide students with relevant financial education.

How can young people get this financial knowledge that they so desperately need? Fortunately, there are organizations who are answering the call to educate the next generation of consumers about how to effectively manage their money. Junior Achievement (JA) is one such organization, working closely with the business and education communities to deliver programs that teach K-12 students age-appropriate, hands-on lessons about how to be financially literate. Focusing three key content areas—financial literacy, entrepreneurship and work readiness—JA is the world’s largest organization dedicated to inspiring and preparing young people to succeed in a global economy.

At the educator’s invitation, JA helps arrange for a business person or local community leader to visit the classroom a few times or throughout the semester to deliver a relevant JA program. The volunteer shares workforce experiences and perspectives with students, all while teaching sound economic principles and reinforcing class curricula. While bridging the gap between school and the real world of work, the volunteer transforms the program’s key concepts into a message that inspires and empowers students to believe in themselves, showing them that they, too, can make a difference in the world.

Students who acquire the necessary financial skills will grow up to run our nation’s businesses, government entities and educational institutions. Hopefully, they will demonstrate more fiscal discipline than their predecessors in both their personal and professional lives, resulting in more robust communities and a stronger American economy.

The U.S. worker needs to be competitive in the global marketplace, but we are not keeping up. According to 80 percent of Americans and 84 percent of high school parents, one major cause is that students are getting passed through the public high school system without the skills they need for college or work, a 2006 Hart Research Associates and Winston Group survey reported. Seventy-two percent of employers report that financial skills are important, and that exercising personal financial responsibility (e.g., balancing a checkbook, budgeting, retirement planning) is an emerging content area affecting work readiness, said a 2007 Partnership for 21st Century Skills study. And 61 percent of employers report that understanding economic issues and the role of business in the U.S. and global economy is an emerging content area affecting work readiness, the study said. For a start, the American public must call for financial literacy courses to be mandatory in school curricula.

Alan Diskin
Alan Diskin is the president of Junior Achievement of Southern Nevada, Inc.